To start at the very beginning, the simplest way to understand what a cryptocurrency is is to know that it is a type of digital currency. And a digital currency, as the name suggests, is a type of currency that only exists in electronic form.
And while digital currencies usually behave like fiat currencies (which is just a fancy name for paper money), cryptocurrencies are different. A cryptocurrency is not just digital, but also encrypted and decentralised.
First, by encrypted, we mean it is highly secure. The crypto in cryptocurrency comes from cryptography which is, basically, the science of making and breaking codes. That means cryptocurrency uses cryptography to secure your currency.
Also, it is decentralised; and here is what makes cryptocurrency really interesting and appealing to many people all over the world.
Here’s what we mean:
Your local currency is controlled and regulated by a governing body in your country, probably the central bank. That’s not the case with cryptocurrencies. They are designed in a way that removes the need for a central governing authority. So, instead of a central bank, every one of us is in charge and do not need to rely on any middleman or bank before we can use cryptocurrency.
As you may very well know, bitcoin is the original and foremost cryptocurrency and it is thanks to its creation that we now have several other cryptocurrencies today that all perform different functions.